This report focuses on the logistics and supply chain management of fashion retail industry based on the provided case of Zara. It is well known that Zara has got success in the fashion industry based on its effective logistics and supply chain management. The report focuses on some issues based on the case and provides some supply chain strategies for the company so that it can grow more in the market. The famous company Zara was founded by Amancio Ortega Gaona in 1975 (LU, 2014). The core business of the company is to manufacture various fabric products based on the need and preferences of the customers. Customers are the priority of Zara and it always provides best quality clothes to them by the effective supply chain management process. The company Zara is the subsidiary of Inditex which is known as the biggest retail company in the world. Basically, Zara is the flagship brand of the Inditex. Zara has competitive advantage in the market over the various competitors i.e. H&M, Benetton and Gap. They have unstable demands and made the competition tougher more the companies. This report focuses on the issues faced by Zara in the market and logistics management strategies to improve the business in the operating market (Gorrepati, 2016).
Current supply chain management of Zara
Zara has effective logistics and supply chain very effective in the business process. The supply chain of Zara is the key factor of the success. It includes sourcing, designing, manufacturing and distribution of outlets. Zara manufactures the clothes and accessories based on the preferences of the customers. The main activities of Zara in supply chain are crafting, trading manufacturing and providing the product on time. Zara has effective control over all the departments of the business and by this it is able to understand the needs and preferences of the customers. Due to the effective supply chain, Zara has minimum responsibilities to handle (Cowe, 2011).
Zara has vertically integrated supply chain by which it is able to control over the various suppliers. By the vertical supply chain, company easily meets with the demands and requirements of the customers. In case of production philosophy of Zara, the company always focuses on the new products and designs. According to the Zara, there must be many designs for the customers in the market. For this manner, Zara launches new designs and products to its showrooms as new arrivals. Along with this, the strategy of the company is to sell the new products as soon as possible (O'Marah, 2016). By this strategy, company is able to create a curiosity among the customers for the new products and designs. Further, Zara never advertised its products as the aim of the company is to build strong brand image by the unique way. The clothes and accessories manufactured by Zara are demanded in various regions by the customers. So, the philosophy of the Zara is to serve the customers by identifying their tastes and preferences. For distributing the products, there are number of warehouses of the company which are helpful in storing various clothes and supplying them effectively (Ferdows, 2003).
In the distribution of the products, Zara only supply the products from its headquarter in Australia. The inventories are carried out to the Australian border and then the logistics carriers take them in to the stores. On the need, stores order more stock from the logistics. If the sale of any particular product is not on the satisfactory then company stops the production of that product. By this strategy, company is able to remove unnecessary products and stock from the business. The managers of the stores place the order by internet and sell out the products. By the use of technologies, company is able to keep the records of the products that are to be created. By the effective and proper communication, Zara makes the process easy and cost efficient (Gallaughar, 2008).
Identification of problems
Zara is the popular fashion retail among the customers. The success of the company depends upon its effective logistics and supply chain management. Zara has satisfied the customers by implementing the innovative strategies and dominating the fashion industry. With the efficient and continuous communication system, Zara is able to connect with the customers by the flow of the information to the designers. There are some factors which must be considered by the Zara fir future success. Although the company has effective supply chain but the preferences of the customers are continuously changing and they are creating new challenges for the fashion retailers. Those challenges are:
- De-localization of clothing manufacture and textile companies
- Improved competitive pressure on Zara,
- Forward- looking integration and more innovation needed by the company for the growth,
- Development of distribution chains,
- Increased more companies and market participants,
- Growing internationalization and commitment of flexibility to the customers, and
- ‘One-brand wardrobes’ no longer exists so; Zara has to increase the share in the customers’ wardrobes (Gattorna, 2012).
It is well known that Zara does not has any king of big issue in its supply chain but it is obvious that the company can face pressure and issues due to increased competition and changed taste of the customers. Sometimes, company has to face the challenges in terms of inventory management supply contracts, distribution network configuration and customer value. So, there is need to adopt effective logistics and supply chain strategies by the company for the permanent strong position in the fashion industry. It is clear that supply chain management deals with the various managerial and technical problems by focusing various common issues which must be addressed by the company effectively and efficiently. As above discussed challenges, it is not easy to manage these challenges by the Zara (Maguire, 2012).
In the company, there is the need of strong management and effective leadership skills in the management team. The founder of the company has taken the best possible decisions for the success in the market. But it is important now to enter in the new market and target new potential customers. There is the requirement of strong human resource management team in Zara for making low cost products. There is the need of continuous and consistent representation of business by the company to maintain the image in the market. To enter in new market and to increased the captured the market, there are some supply management issues in Zara i.e. the company has not developed distribution centers yet. It increases the cost incredibly so the quality management of the product and process is difficult some time (Butler, 2015).
So, basic ally Zara might fail because of various reasons. The company focuses on the various channels at the same time and because of this, company is not able to meet with the speed of the competitors in the global market. Further, Zara might face challenges in terms of proper positioning of the products and it can lose its competitive power and skills in the market. There is the need of producing various ranges of products in all the countries based on the preferences of the customers of the country. Company needs to focus on its distribution strategy along with the product channels (Macchion et al, 2015).
To stay competitive in the operating market, there is the need of effective supply chain strategies in each company. Zara is the most popular and famous brand among the customers. Supply chain management is basically the management various process in the company. It is connected to the different values of the customers in terms of product and services. It can be seen that Zara has the strategy in terms of speed and response. There are some more strategies for the Zara to address above discussed issues.
Planning and control
The concept of planning and control has the strong impact in the business operations of a company. The idea of planning and control will be helpful for Zara in taking major decisions in terms of IT resources and development of infrastructure. By formulating the effective control will have a great impact on the position of IT development which will the key success factor for Zara. This would also be helpful in understanding the changing expectations of the customers by the Zara. Further, forecasting on this principle, the company will get the sustainable management in attracting the plan or higher scale (Bisen & Srivastava, 2011). By the planning ideas, the activities on the research will connect with the new concept which would bring new change in the Zara. Planning and control also plays a significant role in improving the customer satisfaction and their values in the clothing industry. The main aim of implementing the planning and control process is to analyze the various market needs in the increased population. By the planning process, Zara will be able to take most of the market share for the growth and development in the market (Romano, 2009).
The concept of quality management involved the customer expectations and their perceptions related to the products and services. Although Zara has used most of the resources in the products and services with the measurement of quality control, improvement and assurance of the major sectors but still, there is the need of implementation of quality management in the operations of Zara (Lysons & Farrington, 2012). The idea of the quality control will not only focus on the company’s product and services but also it will be helpful in achieving the standard of product quality. The research reveals that there are many loyal customers of Zara due to its quality products. So, there is the need to maintain the quality of the products in the future. If the customers buy a product from the retail store then the product must be good in terms of quality and brand. So, the quality management will be helpful for Zara in improving the quality of the products to make system relevant. It will also remove the inappropriate barriers in the business and improving the distribution systems to recognize the products. Along with this, this will come with the drastic change in the business of Zara in terms of role of leadership, quality culture, management responsibilities and many other changes (Mihm, 2010).
This is the most important part of the supply chain management. Effective inventory management has the great impact in the operation management by which Zara is able to deliver the best products and services. There should be effective inventory management to make strong connections with the customers and the company (Jones & Robinson, 2012). The key factors of supply chain management will connect the idea of inventory and logistics. So, inventory management is the backbone of the business functions of Zara. Inventory management will be helpful to have the financial lead for Zara to control and review the planning in the development process. It will also monitor the economic value of the company. So, to make the important resourceful under the development process, Zara will initiate the important functional changes (Donald & Stephen, 2014).
Resources are the most important part of the organizations but it is well known that resources are very limited. Zara is one of the most popular brands in all over the world. The company operates in the top countries of the world. The lean synchronization strategy must be adopted by Zara for effective operational management (Kerber & Dreckshage, 2011).
In the present time and modern generation, the concept of internet and emails has provided lots of success to the companies. The concept of IT is the most important for the application of marketing tactics in the business which is helpful the whole concept and trend in the marketing. Although Zara has effective capacity management but there is the need of proper capacity management concept to ensure some of the most important factors in the various business operations. By monitoring of regular performance and performance analysis of data measurement will have the strong impact on the infrastructure and capacity planning related to the storage of Zara. The concept of capacity planning will interact with the discipline of the overall performance of the company (Christopher and Towill, 2000).
IT technologies and infrastructure
It is well known that Zara gives priorities to the IT and infrastructure in its business. Zara has adopted a great change in the technology and infrastructure which can be seen in its major stores. Change is important in the clothing industry. Having new technologies, Zara has adopted new innovation by which the company has got great success. IT infrastructure will make the use of various tangible resources such as networks, software, and data centre and hardware facilities. These resources are helpful in making basic functioning of the business such as organization control, budgeting, technical support, network planning etc. improvement in the IT infrastructure will improve the general business strategies to raise the awareness regarding products if Zara among the customers (De Brito, Carbone & Blanquart, 2008). It will also improve the business of Zara on major management systems. This prominent factor adds value in the business process of the Zara. By the IT and newer technologies, Zara will be able to improve customers value in the business and increment in the business requirement will make effective change in maintaining the relationship of the company with various external and internal environment. So, IT technologies would improve the business process to make effective change in terms of mechanism and control in Zara (Sadre, 2012).
It is understood that IT has strong impact on the fashion industry by providing the important resources from an integral value. The variety of Zara is connected with the new trends and sources which are helpful in developing new strategies. With the IT infrastructure, Zara will be able to ship the garments to the major distribution outlets. Further, the products will be transferred to the major centers and stores. This strategy will be helpful in balancing the position by collective important information that will show the appropriate use of designs by Zara for producing newer designs. The IT has advantage to select major design concept identified by the Zara and it will helpful in keeping enough stock in the major stores. So, technology has the significant factor in the expanding the stores of Zara which improve the production level to the greater extent. There are some important technologies which must be implemented by Zara in the business effectively.
Enterprise resource planning
ERP is the important step which enables the visibility of supply chain. ERP can be considered as the backbone of the supply chain management by which all the functional part is connected. By the ERP, company can develop specialized solutions to identify the requirements of the customers and market. Although Zara is using SAP and people soft factors but and there are some more technologies also i.e. grid, catagories and season based scheduling by which Zara can understand the customers more.
Computer-aided design is the next technology can be used by Zara. This technology is useful in realizing the ideas of designers related to fashion into finished product. There are many competitors i.e. Benetton and mango which are using the CAD technology to improve the product life cycle management. B y implementing CAD, Zara will be able to improve the production and development process by the collaborative work of employees in the value chain system.
The objective of providing quick responses by the company is to understand the needs and wants of the customers based on the designs and their willingness to pay for the appropriate product and services. This is the classic ‘pull’ philosophy which can be used by Zara in which the end users and customers set off the supply chain activities. By the quick response activity, Zara will be to improve the flow of information in the supply network to the customers.
Figure 1: Quick Response Process
(Source: Lashen, 2012)
Generally, it is not enough to simply collect the information. The information must be analyzed and shared for the success of the company. For all the functional activities, information and communication technology is the most important part. So, information sharing strategy will be very useful for the company Zara which include operation planning and execution, decision support, and communication between the company and the customers (Lashen, 2012).
By the above discussion, there are the proposals provided for the Zara to stay competitive in the market. it is obvious that the Zara is doing well with its effective supply chain. But it is important to stay connected with the changed preferences of the customers. It is well known that the demands of the consumers are continuously changing. The company has to adopt various business strategies to grow in the market and due to the recommended strategies it will be able to get strong position as the fashion retailer in the world.
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